Many of Jonathan Lethem's novels have looked like experiments in creating striking generic hybrids: Gun, With Occasional Music is a pastiche of Raymond Chandler set in a dystopian future; Girl in Landscape a western set in space; As She Climbed Across the Table a tragicomic campus novel with a science fiction twist. Lethem has always rejected the "genre bender" label, however, and perhaps trying to fit his books into too many categories is simply a way of admitting that they defy categorisation.

His first novel to be set in a recognisably "realist" present was Motherless Brooklyn, narrated by a private detective with Tourette syndrome. Appearing to belong to the relatively respectable genre of "literary crime", it brought him mainstream critical success and a much wider readership. Its follow-up, The Fortress of Solitude, is the powerful story of two boys – one white, one black – who grow up next door to each other in Brooklyn. Rather less respectably, but no less brilliantly, it includes elements borrowed from comic books, exploring the tragic consequences of what it would really mean to have access to "super powers".

Lethem's new novel, Chronic City, likewise includes supernatural elements of uncertain metaphorical status. A giant tiger is said to be prowling Manhattan, unleashing random – or not so random – acts of destruction. But is it really a tiger? Or is it an out-of-control subway-tunnel-drilling machine? And is that any more plausible? A "gray fog" hangs over downtown, the fallout from some terrible and inadequately remembered event. The collapse of the World Trade Centre? The financial crisis? Or perhaps the "gray fog" is too murky a metaphor to have a concrete analogue.

The narrator, Chase Insteadman, is a retired child actor, gracing the fashionable dinner tables of the Upper East Side with his handsome and blandly charming presence. He's engaged to an astronaut, Janice Trumbull, who's trapped in a space station orbiting the Earth on the far side of an impenetrable field of Chinese mines. She writes him letters, which he reads along with everyone else when they're published in the "war free" edition of the New York Times.

Chase's life takes a new turn when he meets Perkus Tooth, an impish, agoraphobic, dope-smoking, freelance pop critic, who used to publish his work in cut-up collages he pasted on the walls of the city. Now he expounds his wacky theories to whoever drops in to his squalid apartment on East 84th Street. Perkus's friends include Oona Laszlo, a prickly ghostwriter with whom Chase soon starts having a clandestine(ish) affair, Richard Abneg, a former radical anarchist squatter who works for the mayor's housing department, and Ava, an affectionate three-legged pitbull terrier.

Variously and together they set out on a series of abortive adventures, by turns farcical and sad, always entertaining but adding up to an oddly plotless whole. This seems to be deliberate: "I was never one for plots," Chase says, in apparent repudiation of Lethem's early novels. The plotlessness is compensated for by some gorgeous writing and some very funny set pieces, such as when Chase and Perkus sneak out of a dinner thrown by Mayor Jules Arnheim, who's not unlike Michael Bloomberg, to get high with another has-been, Russ Grinspoon, who's not unlike Art Garfunkel.

One of Perkus's concerns is that the world he lives in is not the real world, whatever that might be, but a simulation, like an elaborate computer game. In one sense, his fear is straightforwardly justified: he isn't a real person, he's a character in a novel. But he's also worried that the things people worry about have been deliberately created to distract them from the things they ought to be worrying about, and there's a sense in which the question of "simulation" is just such a distraction. Lethem has long been concerned with memory and forgetting and the main characters in Chronic City, apart from Perkus, share a worrying tendency towards forgetfulness (aided by the vast quantities of cannabis they inhale).

Perkus, whose pop-culture obsessions are a little out of date, is the repository of their collective memory, the only one who can remember what the city was like before they all got co-opted by the mainstream. There's a sense that New York isn't what it used to be: it's been cleaned up, emptied out, turned into a simulation of its former self. At one point, Manhattan is described as a "pocket universe". But is the world really shrinking or are the characters just getting old?